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Is Malaysia ready for the ASEAN Economic Community (AEC)?

PIAM and LIAM collaborate with the ASEAN Insurance Council (AIC) to raise awareness on the AEC and provide insurers a platform to prepare for the open market

KUALA LUMPUR, MALAYSIA, 22 MAY 2015 – The ASEAN Insurance Council (AIC) has taken a lead role in creating greater awareness on the ASEAN Economic Community (AEC) Blueprint for the integration of Financial Services and Insurance in ASEAN.

In collaboration with the General Insurance Association and Life Insurance Association of Malaysia (PIAM and LIAM) the AIC organized an AEC Roadshow in Kuala Lumpur on 19 May 2015 for the insurance industry in Malaysia. This Roadshow is timely given that Malaysia has taken over the Chairmanship of ASEAN this year.

Present at this Roadshow were Aznan Abdul Aziz, Director, Financial Sector Development, BNM; Chua Seck Guan, Chairman of the AIC and Chairman of PIAM; the Secretary-General of the AIC, Evelina Pietruschka and Zaharudin Daud, Management Committee of LIAM.

The objective of this Roadshow is to heighten awareness amongst the insurance industry on the AEC and identify priority areas which need to be addressed or refined to enable the industry to better prepare itself for the opening up of the market in the region. The AEC will generate a wide range of opportunities for business and investment with the removal of trade barrier and tariffs across all ASEAN countries. The aim is also to have a single market which will provide an unrestricted flow of goods, services, investment and skilled labour with a freer flow of capital.

Chua Seck Guan in his speech stated that the AEC seeks to achieve a well-integrated and smoothly functioning regional financial system. He highlighted that an ASEAN Insurance Integration Framework (AIIF) has been finalized to guide progressive liberalization. This will ensure more competitive insurance markets in the region which will provide greater choices to consumers. In the long term, it is anticipated that ASEAN could be the world’s fourth largest single market by 2030 and its GDP could exceed US$4.5 trillion by 2030.

The AIC Secretary General, Evelina Pietruschka in her opening remarks cautioned that whilst it may be a challenge for the region to achieve everything that has been planned, insurers should not be influenced by the naysayers and sceptics to just stand by and adopt a wait-and-see approach. Insurers should view the AEC as part of the broader ASEAN vision 2020 and be prepared to embrace the targets expected.

Evelina urged local companies to not feel left out and assume that the AEC is only benefitting the larger multinationals. The market is for everyone to cherish and prosper as the AEC will enhance the image and acceptance of ASEAN insurance players in other markets.

Zaharudin Daud of LIAM highlighted that whilst ASEAN markets are at different stages of development, Malaysia faces the common challenge of a low protection gap, especially within rural and sub-urban population. Although ASEAN member states are undergoing a high rate of urbanization in recent years, there is still a huge vacuum in the underserved markets. The ASEAN’s insurance protection rate of 3.4% (in 2013) is only about half of the global average protection rate of 6.3%.  Closing the gap would require the industry to pool its strength and expertise through raising public awareness on insurance, capacity building and fostering greater regional cooperation.

The half-day roadshow was attended by representatives from PIAM and LIAM member companies, the leaders from the takaful, broking and loss adjusting sectors as well as other insurance affiliated bodies. There was a lively exchange of ideas with various discussion topics and updates presented. This has helped to shed light on the prospects and opportunities of the AEC for the insurance market in Malaysia. The KL Roadshow is the third in the series after Jakarta (2013) and Manila (2014). It will move on to the other capital cities of ASEAN from here.